INDO - Indonesia Energy Corp (INDO) - Price Target Raised On Higher Oil Price Estimates
We are raising our twelve-month price target on the shares of INDO to $15 from $8. The shares have been extremely strong as of late rising more than 600% since the beginning of the year. The increase comes after a private placement of convertible debt in January that may have removed a financing overhang on the stock. However, there have been only limited operational developments. The stock has a history of being very volatile due to its small trading volumes and we have downgraded the stock in the past when it crossed our price objective. The recent strength has forced us to relook at our rating and price target, an action we had planned to take next month after the company reported financial results.Our price objective increase comes due to higher oil price assumptions. Oil prices continue to soar rising from the mid sixties at the beginning of the year to a current level in the mid nineties. In response, we are raising our 2022 WTI oil price estimate to $90 from $60, our 2023 estimate to $80 from $60 and our 2024 estimate to $70 from $55. More importantly, we are raising our long-term oil estimate to $60 from $50. The result of these actions is a significant increase in our earnings, cash flow, and ultimately our valuation estimate for INDO. Specifically, our 2022 EBITDA estimate increases to $5.7 million from $1.5 million, our EPS estimate increases to $(0.11) from $(0.97), and our price target increases to $15 from $8.Further increases may be more difficult. We admittedly were being conservative with our price objective when the stock was depressed even though we knew higher energy prices could justify an increase. Going forward, future price target increases will be more difficult. Should oil prices fall with the stabilization of world events, a price target decrease is even possible. We would also caution investors not to chase the stock above our new price target, noting that past strength has often proven to be temporary. Read More >>